Income Tax Appellate Tribunal - Jaipur
Ito, Sikar vs Smt. Sunita Agaral L/H Late Shri ... on 13 July, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM
vk;dj vihy la-@ITA No. 259/JP/2012
fu/kZkj.k o"kZ@Assessment Year : 2008-09.
The Income Tax Officer, cuke Smt. Sunita Agarwal L/H Late Shri
Ward-1, Vs. Shrawan Kumar Agarwal, Prop.M/s
Sikar. Uaha Agencies, Laxmi Market,
Sikar.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAVPA 5234 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
C.O. No. 30/JP/2012
(Arising out of vk;dj vihy la-@ITA No. 259/JP/2012)
fu/kZkj.k o"kZ@Assessment Year : 2008-09.
Smt. Sunita Agarwal L/H Late cuke The Dy. Commissioner of Income Tax,
Shri Shrawan Kumar Agarwal. Vs. Circle, Sikar.
Sikar.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAVPA 5234 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri A.S. Nehra (Addl. JCIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mahendra Gargia (Advocate)
lquokbZ dh rkjh[k@ Date of Hearing : 29.06.2017.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 13/07/2017.
vkns'k@ ORDER
PER SHRI KUL BHART, JM.
This Appeal by the Revenue (259/JP/2012) and Cross Objection by the assessee (30/JP/2012) both are directed against the order of Ld. Commissioner of Income Tax (Appeals)-III, Jaipur dated 23/12/2011 pertaining to the Assessment Year 2008-09. Both Appeal and Cross Objection were taken up together and are 2 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
being disposed off by way of consolidated order for the sake of convenience and brevity.
2. The Appeal of the Revenue and the Cross objection of the assessee were dismissed vide order dated 22/12/2015 on account of low tax effect. Subsequently, it was brought to the notice of the Bench, by the way of Miscellaneous Application, on behalf of the Revenue, that the tax effect in this case is Rs. 10.64 lacs which is more than the prescribed limit for filing an appeal before the Tribunal. Accordingly, the order was recalled and thus the Appeal and the Cross Objection are fixed for hearing.
3. First we take up Revenue's Appeal in ITA No. 259/JP/2012 pertaining to the A.Y. 2008-09.
The Revenue has raised following grounds of appeal:-
"1. The CIT(A) has erred in deleting the disallowance of Rs. 12 lakhs even when the rejection of books of account under sec. 145(3) had been upheld by him.
2. The CIT(A) has erred in deleting the addition of Rs. 19,32,946/- made by the AO in respect of the assessee's income from electrical business.
3. The appellant craves leave to add, alter, amend, withdraw or insert any ground or grounds of appeal before or at the time of hearing of the appeal."
4. Ground no. 1 is against deleting the disallowance of Rs. 12 lakhs made by the Assessing Officer on account of disallowance out of indirect expenses. 4.1 Ld. D/R submitted that in this case, the Ld. CIT(A) affirm the view of the Assessing Officer for rejection of books of account for deleting the disallowance. On the contrary, Ld. AR supported the order of the Ld. CIT(A) and submitted that 3 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
similar addition was made in the A.Y. 2007-08 and the matter travelled upto the stage of the Tribunal and the Tribunal was pleased to delete the disallowance. The Ld. CIT(A) has not given any reason, as to why this disallowance was reduced. 4.2 We have heard the rival contentions, perused the material available on record. We find that the Ld. CIT(A) has given a finding by observing as under:-
"3.3 I have duly perused the rival stands of the AO and the Ld. AR as discussed above. From the impuged order, it can be seen that the AO's above stand is based on the similar addition made in the AY 2007-08, wherein the indirect expenses of branches were also found excessive and unreasonable, in the given situation. However, at the appellate stage, the Ld. AR submitted that the above addition made in the AY 2007-08 has been decided by the Hon'ble ITAT jaipur bench, in the favour of the appellant, vide its order No. 1401/JP/2010 and Co. 6/JP/2011, dated 21/10/2011. In support, Ld. AR placed a copy of the said decision of the Hon'ble Tribunal on record and pleaded that, in view of the said order, the impugned disallowance made by the AO be deleted. On perusal of 'para 4' of the assessment order, wherein the Ld. AO has discussed the impugned disallowance, the submissions of the Ld. AR made in support of this groud of appeal and after going though the relevant para i.e. 12 & 13 of aforesaid order of the Hon'ble Jurisdictional Bench of the ITAT, I find that the contention of the Ld. AR as factually correct and in order. Under similar circumstances, the course have held that the 'principal of judicial discipline' demands that the decisions of higher wisdom, given i.r.o., the common issue, should be followed by the subordinate authorities in other cases involving the same matter. In other words, for the sake of better judicial administration and unity, the decisions given by jurisdictional Tribunal/Courts are bending in nature on the lower appellate/ administrative authorities. The above ratios have been echoed in the following decisions:-4 ITA No. 259/JP/2012 & C.O. 30/JP/2012
Smt. Sunita Agarwal, Sikar.
i. Dunlop India Ltd. - 154 ITR 172(SC)
ii. Bank of Baroda - 256 ITR 385(Bom)
Accordingly, while respectfully following aforementioned order of the Hon'ble ITAT, Jaipur Bench, passed in the appellant's own case for AY 2007-08, this issue is decided in favour of the appellant. In view of the same, the AO is directed to allow the appellant's claim of Rs. 12 lacs made, i.r.o., disallowance of indirect expenses of branch offices of the appellant. Consequently, this ground of appeal is allowed."
4.3 From the above finding of the Ld. CIT(A), it appears that the Ld. CIT(A) followed the decision of the Tribunal in assessee's own case pertaining to the Assessment Year 2007-08. The Revenue has not pointed out any change into the facts and circumstances in this year. Therefore, we do not see any reason to interfere into the finding of the Ld. CIT(A), same is hereby affirmed, this ground is Revenue's appeal is dismissed.
5. Ground no. 2, is against deletion of Rs. 19,32,946/- made by the Assessing in respect of the assessee's income from electrical business. 5.1 Ld. D/R supported the order of the Assessing Officer. 5.2 Per contra, the Ld. Counsel for the assessee supported the order of the Ld. CIT(A), and there is not infirmity into the order of the Ld. CIT(A), same is hereby affirmed.
5.2 We have heard the rival contentions, perused the material available on record. We find that Ld. CIT(A) has decided the issue in para 4.3 of his order as under:-
"4.3 I have carefully considered all the relevant facts and circumstances of issue consideration. In this regard, the Ld. AR also drew my attention to the 5 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
fact that the similar addition made by the AO, in the AY 2007-08, has been deleted by the CIT(A) and also by the Hon'ble ITAT Jaipur Bench, vide their order dated 21-10-2011. From the perusal of the above order of the Hon'ble ITAT Jaipur Bench, passed in the appellant case only, I found the Ld. AR's submission factually correct and in order. Accordingly, while respectfully following the decision of the Hon'ble Bench, I also hold that the provision of Sec. 194H are not applicable, i.r.o. commission/discount paid by the appellant to is retailers, as such. Accordingly, the addition of Rs. 1,26,82,349/-, made u/s 40(a)(ai), on this account, is hereby deleted. Consequently, this ground of appeal is upheld."
5.3 We find that the Assessing Officer had made disallowance by observing that the Department has filed an appeal before the Tribunal pertaining to the Assessment Year 2007-08. However, the Ld. CIT(A) has given a finding on fact, that the issue has been decided in favour of the assessee by the decision of the Tribunal pertaining to the Assessment Year 2007-08 in ITA No. 1401/JP/2010. This finding is not controverted by the Revenue in ITA No. 1401/JP/2010 & CO No. 06/JP/2011. The copy of the decision of the Tribunal, is enclosed at Paper Book page no. 20-51. Therefore, we do not see any reason to disturb the finding of the Ld. CIT(A), same is hereby affirmed, this ground of Revenue's appeal is dismissed.
6. Ground no. 3, is general in nature and needs no separate adjudication.
7. In the result, appeal of the Revenue is dismissed.
8. Now, we take up Cross Objection 30/JP/2012 pertaining to the Assessment year 2008-09.
The Assessee has raised the following ground of Cross Objection.
"1. The Ld. CIT(A) erred in law as well as on the facts of the case in invoking Sec. 145(3) of the Act. The provision so invoked being 6 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
contrary to the provisions of law and facts, the same kindly be quashed.
2. The cross-objection prays your honour indulges to add, amend or alter of or any of the ground of CO on or before the date of hearing."
The assessee has also taken an additional ground of Cross Objection that reads as under:-
"1. The Ld. CIT(A) erred in law as well as on the facts of the case in enhancing the income by Rs. 5 lacs on account of the alleged suppression of sale. The enhancement so made being contrary to the provisions of law and facts, the same kindly be deleted in full."
9. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. The submissions of the assessee are as under:-
Submission
1. Firstly, we rely upon the written submission (PB 1-2) made before the Ld.CIT(A). The same are reproduced hereunder for a ready reference.
"1. The AO has rejected the books of account u/s 145(3) in a routine manner without pointing out any defect in the books for the year under appeal.
2. The reason given by the AO for rejection of books of accounts is that in the preceding year also the books were rejected and the assessee admitted that the position of accounts is the same for this year as was in the preceding year. This kind of wild assumption and presumptions cannot be basis for rejection of books of accounts for the current year. It will not be out of placed to mention that the assessee has given full explanation to CIT(A) in respect of all the alleged defects pointed by the AO in AY 2007-08.
3. The assessee has shown better GP rate of 3.31% (as per revised GP chart filed with covering letter dt. 22.12.2010) in this year as compared to GP rate of 3.14% shown in the preceding year. Complete Stock records for all the items trades are maintained and produced before AO.7 ITA No. 259/JP/2012 & C.O. 30/JP/2012
Smt. Sunita Agarwal, Sikar.
4. The books for the current year cannot be rejected pointed out any specific defect in the maintenance of books of accounts for the current year.
5. In view of the fact that the rejection of books was itself wrong, the additions made and discussed in Grounds no. 3 and 4 of this appeal are bad in nature and deserve to be deleted."
2.1 The law u/s 145 (3) provided three basis to invoke the same, viz (i) Where the AO is not satisfied about the correctness/completeness of the accounts (ii) where the method of accounting provided in Sub Sec. (1), is not followed or (iii) the Accounting Standards as notified u/s 145 (2) have not been followed by the assessee. There appears no dispute on the last two conditions. We may submit that invoking of Sec. 145 (3) on the facts of the present case was based on the misconception on laws as well as facts. The AO though alleged some deficiencies in A. Y. 2007-08 (also taken basis for rejection this year) however, none of them are such so as to be based for invoking Sec. 145 and more particularly when they are contrary to facts and the submissions, as discussed hereunder.
2.2 It is not disputed that the assessee has maintained all the books of account at all the cost centers consisting of cash book, Journal, ledger. All purchase, sales and expenses are fully vouched. Complete stock records for all the items traded are maintained. The accounts are audited u/s 44AB (PB 60-62). No adverse comment has been made by the tax auditor. Further all the books of account were duly produced before the AO as admitted by him at page 1 para 1 of his order.
2.3 In this year firstly, the AO has not at all pointed out any specific defects, in the accounts of this year. He merely relied upon the assessment for A. Y 2007-08 without carrying out any independent examination and pointing out any defects. Every year is a separate year and the AO was supposed to record independent finding for this year. There appears no cogent material or satisfaction on any of the three pre-requisites before 8 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
invoking of Sec. 145 (3). Secondly, the Ld. AR merely stated that the system of accounting this year also was the same however, this has been completely misread in repeated allegation that the assessee admitted the same position of accounts in both the years even for invoking of Sec. 145. On the contrary, in A. Y. 2007-08 the assessee challenged the application of 145 (3). Thus, there being no such basis Sec. 145 has to be quashed.
2.4 The only objections raised by the AO in A. Y 2007-08 were that
(i) in AO's view there was a higher amount of commissions paid or
(ii) higher number of employees were kept than what was reasonably required. The assessee acted as a businessman and in his decisions the AO could not have interfered as is the law settled.
(iii) Cash Sale cannot be doubted: With regard to the other allegation that most of the sales of recharge coupons were made in cash and the same was not fully verifiable in the absence of complete name and address of the purchaser. It is submitted that in fact, the authorities below have placed unwarranted stress on this issue. Making sales in cash is nowhere prohibited. Nor therefore, is a valid basis of rejection. It has been held that cash transactions, where the delivery of the goods is taken against cash payment. It is hardly necessary for the seller to bother about the name and address of the buyers and books of assessee cannot be rejected u/s 13 of the IO Act, 1922 (sec. 145) simply on the ground that address of the buyer was not mentioned in case of the cash transactions. Kindly refer R. B. JAssa Ram Fateh Chand Sugar Deptt. v/s CIT (1970) 75 ITR 33 (Bom).
Undisputedly, there exist a very tough competition in the market with the availability of various competitors viz Airtel, Reliance Mobile, BSNL, Vodafone, Idea, TATA Indicom, etc and the assessee having four braches situated at remote places, the demand of the buyer (dealers and retailers) cannot be denied, if the assessee had to survive, he is bound to take care of its customers. Hence, cash sale is not at all 9 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
abnormal. Consequently therefore, even the identity of the buyers is not at all required to be proved as held. Moreover, it is case of sale not of claiming expenditure. None of these objections fall under any of parameters of Sec. 145, hence, same may kindly be quashed.
3. On merits: Alternatively 3.1 Addition need not be made, even if Sec 145 invoked: The law is well settled that even invoking of Sec. 145 does not confer blind powers upon the lower authorities. They are bound to make an honest estimation of income, based on the material available on record, past history of the case, local knowledge and repute of the assessee, as held in CIT v. Gotan Lime Khaniz Udyog 256 ITR 243 (Raj). However, it will appears that the Ld. CIT (A) has not made a fair estimation in conformity of the above settled judicial guideline.
3.2.1 Enhancement of income is against law & facts: At the outset, it is submitted that a bare perusal of the CIT (A) order shall reveal that he proceeded more on drawing inferences, logics and corollaries against by going the actual facts & figures of the present year and by making a comparison thereof with the preceding year. Though he called for the record yet however, he did not examine the specific contention of the Ld. AR [page 21 para 6.4 of CIT (A)] that the facts & circumstances in the current year were different (at least on this aspect) than the previous year. He even did not mention the figure / % of commission passed on by the assessee this year so as to examine whether such a payment was really excessive in the context of the agreement/as permitted by the BSNL, as was the allegation made last year.
3.2.2 Since the only basis for alleging suppressed sale, is the detailed discussion made by the AO and the Ld. CIT (A) in A. Y. 2007-08, the facts of that year are summarized for better appreciation (though such details are 10 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
available in ITAT order or A. Y 2007-08 PB 20-51). In that year BSNL permitted the assessee to pass on minimum commission of 3 % till 12th November 2006, as per earlier agreement 21st March 2005 (copy of relevant section IV of the agreement is at PB 73) but for the remaining year it was raised to minimum 5 % by second agreement dated 14.11..2006 (Kindly see annexure A annexed to the w/s). The Ld. CIT (A) refers 3%or 4.5 % (for later correct is 5%). The assesee, in fact, passed on only minimum 3%/5% as the case may be. The AO however, read the facts as if only 3% was permissible as against alleged actual payment 4% for both period and hence, the assessee paid 1% in excess therefore, taking 1% of the turnover, he disallowed Rs. 30.87 Lacs however, the Ld. CIT (A) considered average 3.86 % reasonable and comparing alleged actually paid 4%, treated balance 0.14 % excessively paid and computing with reference to turnover reduced the addition to Rs. 5 LAcs. The Hon'ble ITAT further reduced the addition to Rs. 2.50 Lacs.
The impugned enhancement is a result of misconception carried by the Ld. CIT (A) he did not appreciate that the second agreement for the last 4.5 months continued this year as well which permitted minimum 5% pass on and the Ld. CIT (A) itself in the previous year for the last 4.5 months accepted that the assessee has not passed the commission exceeding 5 % and he made the addition only on the basis of the excessive commission paid in the first 7.5 months. Thus, there was no occasion either for the AO (who rightly made no addition on these facts) or for the Ld. CIT (A) to suspect a wrong committed by the AO and to make enhancement. He did not even examine what was passed on this year (which is 4.5-5 %) and what the assessee was supposed to pass i.e 5 %.
There apart, even on the count of fair estimation he was not fair while estimating the addition [assuming, if any called for though not conceding] at Rs. 5 LAcs by comparing the figures of the suppressed sale of last year viz-a- viz addition sustained by the Hon'ble ITAT at Rs. 2.50 Lacs and ignoring that 11 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
the total addition in that year was made of Rs. 30.87 Lacs. In fact, one must appreciate that a huge addition oif Rs. 30.87 Lacs was reduced to a meagre Rs. 2.50 Lacs and this way there was no occasion to make any addition at all this year.
10. Ld. D/R opposed the submissions and submitted that the Assessing Officer has given specific finding with regard to the defects into the books of accounts.
11. We have heard the rival contentions, perused the material available on record and gone through the order of the authorities below.
12. Ground no. 1 and 2 of the Cross Objection against rejection of books of accounts. In para 2.3 of the order of the Ld. CIT(A) has upheld the action of the Assessing Officer. As the facts are identical, as were in assessment year 2007-08 after considering the totality of the facts and material placed before us. There was sharp increase into the expenses. The assessee had not challenged the rejection of books of account in the Assessment Year 2007-08. Even in the submissions made before this Tribunal has made alternative plea that even if the action of invoking provision of Section 145 of the Act upheld in that event also the Assessing Officer is required to make best judgment on the basis of some material which cannot be based upon conjecture summaries. The law is well settled, the Assessing Officer is within its power to reject books of accounts, if he finds that from the books so placed before him, true profit cannot be deduced. In the present case, the Assessing Officer in his wisdom finding that the facts are identical in the Assessment Year 2007-08. The assessee has not placed any material suggesting that there is change into facts and circumstances in this year. Therefore, he rejected the books of accounts, on the reasoning of the Assessment Year 2007-08. We do not see any 12 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.
reason to interfere in this finding of the Assessing Officer. However, we find merit into the contention of the assessee that the estimation should not be based merely on the guesswork, it should be based on the material gathered by the Assessing Officer during the Assessment proceedings. In the present case, the Ld. CIT(A) made an adhoc addition of Rs. 5 lacs on the ground for possible suppression of sale. In our view, this finding of the Ld. CIT(A) is not justified. He ought to given specific reasoning for sustaining such addition. In our view, addition cannot be made purely on the basis of conjecture. Therefore, this additional ground of the Cross Objection of the assessee is allowed whereas ground no. 1 & 2 are dismissed. Accordingly, the adhoc addition of Rs. 5 lacs sustained by the Ld. CIT(A) is deleted.
13. In the result, appeal of the Revenue in ITA No. 259/JP/2012 is dismissed and the Cross Objection of the assessee bearing no. 30/JP/2012 is partly allowed. Order is pronounced in the open court on Thursday, the 13th day of July 2017.
Sd/- Sd/-
( HkkxpUn ½ ( dqy Hkkjr)
( BHAGCHAND) ( KUL BHARAT )
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 13/07/2017.
Pooja/
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. The Appellant- The Income Tax Officer, Ward-1, Sikar.
2. The Respondent - Smt. Sunita Agarwal, Sikar.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 259/JP/2012 & CO No. 30/JP/2012) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 13 ITA No. 259/JP/2012 & C.O. 30/JP/2012 Smt. Sunita Agarwal, Sikar.